ED Releases Highly-Anticipated Verification Guidance

The Department of Education (ED) released guidance on the verification process on Wednesday that would decrease the burden on students, families, and financial aid administrators and ensure easier access to federal financial aid.

In an Electronic Announcement, ED wrote that it would allow copies of tax returns and written statements of non-filing to be accepted for verification purposes in lieu of obtaining IRS tax return transcripts and verification of non-filing (VONF) forms for both the 2018-19 and 2019-20 application years. This guidance is effective for all verifications conducted on or after January 9, 2019, regardless of FAFSA processing date.

Schools have been eagerly awaiting this guidance since it was announced by ED at the Federal Student Aid (FSA) conference in November, and issues with verification have compounded recently as the IRS “Get Transcript” service has been offline for scheduled maintenance since the end of 2018.

Going forward, a signed copy of either an individual's 2016 or 2017 income tax return, depending on application year, is acceptable documentation for verification of income for tax filers. According to the new guidance, students or parents do not need to prove or provide a written statement that they attempted to obtain their tax return transcript or use the IRS Data Retrieval Tool (DRT). Schools are still able to use information imported directly from the IRS DRT or tax return transcripts as documentation for verification.

Independent applicants and parents of dependent students who are subject to verification of nonfiling (VONF) requirements will still need to obtain proof from the IRS that they did not file taxes. However, the new guidance allows individuals who are unable to secure that document to submit to the school a signed statement certifying that they did attempt to obtain the VONF from the IRS and were unable to do so, and that they did not file a 2016 or 2017 income tax return, as applicable.

Schools have flexibility on the format of the written statement, but it needs to be signed by the non-filer. For example, the non-filer could simply submit a signed attestation, or the school could provide a form with standard language about attempts to obtain the VONF that the non-filer only needs to sign. Given the flexibility provided by ED, NASFAA is not seeking additional clarification in this area.

Independent students and parents who had income for those years, but did not have to file an income tax return must list the amount of income from each source, and include a copy of IRS Form W-2 from each source.

Under the guidance, students and parents granted an extension beyond the automatic six-month extension who are required to file a 2016 or 2017 income tax return may submit the following for verification:

Signed statement that certifies the individual was unable to secure VONF documentation from the IRS, that they did not file a 2016 or 2017 income tax return, and includes a list of sources of income and the amount of any income;

Copy of filed IRS Form 4868 for the appropriate tax year;

Copy of the IRS’s approval of an extension beyond the automatic six-month extension for the appropriate tax year; and

Copy of any IRS Form W–2s for each source of 2016 or 2017 employment income received

The flexibilities on verification documentation only apply to the specific groups in the announcement. Current rules on verification documentation continue to apply to amended tax return filers and victims of identity theft. Schools can refer to the FSA Handbook for verification requirements for these populations.

Publication Date: 1/9/2019

Frank G |
1/17/2019 10:26:25 PM

Can we use 1040s for SAR Codes 400/401 for students not selected for verification?

In past instances the following was included in the AVG and for 1040 exceptions:

For persons who have a tax professional prepare their return, instead ofa copy of the return with the filer’s signature, you may accept one thathas the name and Preparer Tax Identification Number (PTIN) of thepreparer or has his SSN or EIN and has been signed, stamped, typed,or printed with his name and address.

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